SEC NEWS DIGEST

Commission announcements

Marshall Gandy Named Head of Examinations Program in SEC’s Fort Worth Regional Office

The Securities and Exchange Commission today announced the appointment of Marshall Gandy as Associate Regional Director for Examinations in the agency’s Fort Worth Regional Office.

Mr. Gandy has served as a Senior Regional Counsel at FINRA since 2008. Before that he was a trial counsel and enforcement attorney at the SEC, the Presiding Judge in a Dallas County Criminal Court, and an Assistant District Attorney in Dallas County. In his new position as Associate Regional Director for Examinations, Mr. Gandy will lead a staff of approximately 40 accountants, examiners, attorneys, and support personnel responsible for examining broker-dealers, investment companies, investment advisers, and transfer agents in Texas, Oklahoma, and Arkansas.

“Marshall has a deep commitment to public service and the SEC’s core mission, and brings a wealth of experience as a securities lawyer, county court judge, and assistant district attorney,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “His experience and leadership make him well-suited for our mission to prevent fraud, promote compliance, monitor risk, and inform policy.”

Carlo di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations, added, “I am pleased to welcome Marshall to the exam program and back to the SEC. His hard work, experience, and tenacity will make him a real asset in implementing the national examination program’s strategies for investor protection and market integrity at a time of significant regulatory change.”

Mr. Gandy said, “I am thrilled and privileged to have the opportunity to return to the Commission and work with the enormously dedicated team in the Fort Worth Regional Office to help protect investors through administering the SEC's nationwide examination and inspection program.”

Mr. Gandy received his law degree from Southern Methodist University and his bachelor’s degree from Sam Houston State University. (Press Rel. 2012-36)

Judge Orders Brookstreet CEO to Pay $10 Million Penalty in SEC Case

The Securities and Exchange Commission today announced that a federal judge has ordered the former CEO of Brookstreet Securities Corp. to pay a maximum $10 million penalty in a securities fraud case related to the financial crisis.

The SEC litigated the case beginning in December 2009, when the agency charged Stanley C. Brooks and Brookstreet with fraud for systematically selling risky mortgage-backed securities to customers with conservative investment goals. Brookstreet and Brooks developed a program through which the firm’s registered representatives sold particularly risky and illiquid types of Collateralized Mortgage Obligations (CMOs) to more than 1,000 seniors, retirees, and others for whom the securities were unsuitable. Brookstreet and Brooks continued to promote and sell the risky CMOs even after Brooks received numerous warnings that these were dangerous investments that could become worthless overnight. The fraud caused severe investor losses and eventually caused the firm to collapse.

The Honorable David O. Carter in federal court in Los Angeles granted summary judgment in favor of the SEC on February 23, finding Brookstreet and Brooks liable for violating Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. The judge entered a final judgment in the case yesterday and ordered the financial penalty sought by the SEC.

“Brooks’ aggressive promotion and sale of risky mortgage products to seniors and other risk-averse investors deserves the maximum penalty possible, and that is what he got,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Those who direct such exploitative practices from the boardroom will be held personally accountable and face severe consequences for their egregious actions.”

Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office, added, “The CMOs that Brookstreet sold its customers were among the most risky of all mortgage-backed securities. This judgment highlights the responsibility of brokerage firm principals to ensure the suitability of the securities they sell to customers.”

In addition to the $10,010,000 penalty, Brooks was ordered to pay $110,713.31 in disgorgement and prejudgment interest. The court’s judgment also enjoins both Brookstreet and Brooks from violating Section 10(b) of the Exchange Act as well as Rule 10b-5.

The SEC is awaiting a court decision in a separate Brookstreet-related enforcement action filed in federal court in Florida. In that case, the SEC charged 10 former Brookstreet registered representatives with making misrepresentations to investors in the purchases and sales of risky CMOs. Two representatives settled the charges, and the SEC tried the case against the remaining eight representatives in October 2011.

The SEC has brought enforcement actions stemming from the financial crisis against 95 entities and individuals, including 49 CEOs, CFOs, and other senior officers. (Press Rel. 2012-37)

Commission Meetings

Closed Meeting on Thursday, March 8, 2012 at 2:00 p.m.

The subject matter of the Closed Meeting scheduled for Thursday, March 8, 2012 will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; a litigation matter; an adjudicatory matter; and other matters relating to enforcement proceedings.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.

ENFORCEMENT PROCEEDINGS

Commission Declares Decision as to James Frankfurth Final

The Commission has declared final the initial decision of an administrative law judge barring James Frankfurth from associating with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent; and from participating in any penny stock offering. The initial decision found that on May 9, 2005, the United States District Court for the Eastern District of New York accepted a guilty plea by Frankfurth to one count of conspiracy to commit securities fraud in violation of 18 U.S.C. § 371. United States v. Kozak, 02-CR-879 (Kozak case). On June 21, 2010, a criminal judgment was entered against Frankfurth in the Kozak case, and he was sentenced to five years probation, which included six months home detention and ordered to pay restitution in the amount of $338,338.

Frankfurth was the executive director of a Delaware limited liability company operating out of San Diego, California. From approximately April 1999 through May 2001, Frankfurth, along with co-conspirators, sold unregistered securities to 95 investors. Frankfurth's sales agents employed cold-calling and high-pressure techniques in their solicitation of investors. The sales of the unregistered offering raised approximately $3.1 million. Frankfurth also repeatedly misrepresented his commissions to investors. Frankfurth and his co-conspirators circulated Private Placement Memorandums (PPMs) to investors. The PPMs materially misrepresented that between ten and fifteen percent of the proceeds would be paid as commissions to Frankfurth and an independent sales office (ISO) that Frankfurth operated. In reality, the commissions were between thirty and forty-five percent of the investor's proceeds, which were concealed by Frankfurth and his co-conspirators.

The initial decision also found that Frankfurth's actions were egregious and recurrent. Additionally, Frankfurth has made no assurances against future violations. And, because his securities licenses have lapsed, without the imposition of a bar, Frankfurth would be able to retake the licensing examinations and return to the securities industry, which would present opportunities for future violations. (Rel. 34-66504; File No. 3-14509)

Delinquent Filer’s Stock Registration Revoked

The registration of the registered securities of Heli Electronics Corp. has been revoked. It had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, it violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocation was ordered in an administrative proceeding before an administrative law judge. (Rel. 34-66505; File No. 3-14736)

SELF-REGULATORY ORGANIZATIONS

Proposed Rule Changes

NASDAQ OMX PHLX LLC filed a proposed rule change (SR-Phlx-2012-23) under Section 19(b)(1) of the Securities Exchange Act of 1934 to amend registration and qualification requirements. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66497)

ICE Clear Credit LLC filed a proposed rule change (SR-ICC-2012-01) under Section 19(b)(1) of the Securities Exchange Act of 1934 to provide that one hundred percent (100%) of the Initial Margin requirement for client-related positions cleared in a clearing participant’s customer account origin may be satisfied by a clearing participant utilizing US Treasuries. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66500)

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the Chicago Board Options Exchange, Incorporated (SR-CBOE-2012-020) to amend the CBOE Stock Exchange Fees Schedule has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66498)

A proposed rule change filed by NASDAQ OMX BX, Inc. to amend the BOX LLC Agreement (SR-BX-2012-014) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66501)

Approval of Proposed Rule Changes

The Commission approved a proposed rule change submitted by the Chicago Stock Exchange, Inc. (SR-CHX-2012-02) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 to add to and amend its rules regarding the obligations of Institutional Brokers registered with the Exchange. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66503)

A proposed rule change filed by Chicago Mercantile Exchange, Inc. (CME) amending rules relating to credit default swap guaranty fund (SR-CME-2012-01) has been approved pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66506)

Designation of Longer Period For Commission Action on Proposed Rule Change

The Commission has designated a longer period for Commission action under Section 19(b)(2) of the Securities Exchange Act of 1934 on a proposed rule change (SR-NASDAQ-2012-002) filed by The NASDAQ Stock Market LLC to adopt an alternative to the $4 initial listing bid price requirement for the Nasdaq Capital Market of either $2 or $3, if certain other listing requirements are met. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66499)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.